Abstract
Grain storage is strategic for agribusiness and therefore, it is important to consider the usefulness and benefits of its implementation. This study aims to identify the economic and financial viability of investing in grain storage structure at farm level using capital budgeting techniques. Considering the particularities of farms in the Midwest region of Brazil, the following investment valuation techniques were used: Net Present Value (NPV), Equivalent Uniform Annual Worth (EUAW), Internal Rate of Return (IRR), Modified Internal Rate of Return (MIRR), Discounted Payback (DP), Profitability Index (PI), Benefit/ Cost Ratio (B/C), Sensitivity Analysis and Monte Carlo simulation. The results of NPV and EUAW were positive. The results of IRR was 14.08% and MIRR was 11.39%, with a payback of 11.81 years, an PI of US$ 1.31 and a B/C ratio of 3.16. From the risk analysis, it can be inferred that the investment is low risk since there is a 99.97% probability of NPV being greater than zero. Therefore, grain storage is a potentially viable alternative for increasing the competitiveness and wealth of Brazilian farmers, even in the context of an emerging economy.
Highlights
The United Nations (UN) estimates that the global population will be 9.8 billion by 2050
The Net Present Value (NPV) shows that at the end of the investment, the sum of discounted earnings is greater than the amount invested in the project
Equivalent Uniform Annual Worth (EUAW) was US$ 103,148.32, which represents the conversion of NPV to annual values and producer’s earnings of US$ 103,148.32 per annum
Summary
The United Nations (UN) estimates that the global population will be 9.8 billion by 2050. A greater concentration of people in cities and an increase in per capita income will increase the demand for food by 70% (Bojanic, 2017). In this scenario, the optimistic expectation of agricultural production and productivity expansion (Saath and Fachinello, 2018), in contrast to the significant waste in post-harvest operations in developing countries (Kumar and Kalita, 2017), indicates the need to improve and expand the static capacity of grain warehouses, especially in Brazil (Patino et al, 2013), which has high rates of growth and acceleration for soybean production (Maranhão et al, 2019; Garrett and Rausch, 2016). Brazil is one of the most important players in the world regarding food production
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